Corteva potential breakup negative or `puzzling' at best - analyst

[Corteva Agriscience Chestnut Run Plaza site in Wilmington, Delaware]
Bo Shen

A potential breakup of Corteva's (NYSE:CTVA [https://seekingalpha.com/symbol/CTVA]) seed and pesticide businesses appears to be negative or "puzzling at best," according to a KeyBanc analyst.

The WSJ reported on Friday that Corteva (CTBA) is evaluating a breakup [https://seekingalpha.com/news/4494582-corteva-gains-on-report-its-exploring-a-breakup] of its seed and pesticide businesses into two separate companies and the company may announce its plans soon. Shares of Corteva fell 3.4% on Monday.

"Our initial take is that, if true, the news is negative or puzzling at best for CTVA shares due to: 1) little SOTP valuation upside; 2) management's concern about potential liability is concerning; and 3) sales and costs dyssynergies," KeyBanc analsyt Aleksey Yefremov wrote in a note on Sunday.

Aleksey estimates the cost of creating two standalone public companies at ~$50 million to -$60 million.

"While this remains speculation, we do not see the financial or strategic merits," BofA analyst Matthew DeYoe wrote in a note. "CTVA’s current valuation of 13.4x street EBITDA doesn’t show immediate value creation through a SOTP analysis. Moreover, we believe that if true, any separation would possibly create two weaker entities."

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